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Antitrust Analysis Involving Intellectual Property and Standards: Implications from Economics

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There is a significant industrial organization (IO) economics literature on the economics of innovation and intellectual property (IP) protection. As some courts and antitrust agencies have recognized, the IO economics toolkit for business arrangements(e.g., vertical restraints, tying and bundling, etc.) involving IP rights is sufficiently flexible to be applied in high-technology areas involving antitrust and IP. In this Article,the authors explain the economics of innovation and IP protection, licensing, and compulsory licensing, with specific applications to standards development and to standard-essential patents. The authors then propose first-best approaches based on the implications of the economics that courts and antitrust agencies can apply at each stage of an antitrust inquiry, from market definition and market power to the assessment of particular business practices. The authors conclude by providing a summary of the approach applied in each major antitrust jurisdiction—China, the European Union, India,Japan, Korea, and the United States.